When Sir David Tweedie, moved into private sector accounting, he was shocked by what he discovered.

It was the late 1980s and Tweedie, who had previously worked as an academic and was technical director of the Institute of Chartered Accountants of Scotland (ICAS), had taken up a post as national technical partner at KPMG in London, following the firm’s creation through the merger of KMG Thomson McLintock and Peat Marwick.

“I started to become absolutely horrified at some of things that were going on and the schemes the investment bankers were coming up with. They were managing to show debt as equity or manipulating profits. I spoke out a lot and wrote articles about it,” says Tweedie, Chairman of the Board of Trustees of the International Valuation Standards Council (IVSC), the independent global standard-setter for the valuation profession.

Man of values


At the time, the United Kingdom government had set up a committee with the various accounting institutes to look into accounting practices and establish a new standards board. Tweedie was invited by the chairman of the committee to give his views on the way forward.

In his typically forthright way, he told him exactly what he thought. “It was only halfway through that I realized I was being interviewed for the position of chair, so I became the first chairman of the U.K. Accounting Standards Board (ASB) in 1990,” he says.

Tweedie describes his time as chairman of the ASB as probably the most satisfying part of his professional life. He quickly set up an Urgent Issues Task Force of 14 people to start looking into the schemes the banks were using. If at least 10 people on the task force voted against a particular scheme, it was abolished. “We went through dozens of schemes and we got rid of them, one after the other. It was incredibly satisfying,” he says.

The birth of the IASB

The ASB was also meeting with its counterparts in the United States, Canada and Australia around two or three times a year, and they invited the International Accounting Standards Committee – predecessor of the International Accounting Standards Board (IASB) – to join them. “We would look at various issues and it got to the stage where we started to discuss producing joint standards. It was starting to become a global standard-setter,” he says.

The meetings eventually led to the creation of the IASB in 2001, and Tweedie was asked to become the organization’s first chairman, a post he held for 10 years until 2011.

Around the time, the IASB was launched, the European Union had decided to adopt International Accounting Standards (IAS) for the consolidated accounts of European-listed companies. “We [the IASB] thought there was a lot in the IAS that we should start cleaning up. In retrospect, it was maybe a mistake. The biggest one we had problems with was IAS 39 Financial Instruments: Recognition and Measurement, which was very complicated. I used to say if you understand it, you haven’t read it properly,” Tweedie remembers. “The problem was that once we started touching that, everyone thought we had written it and we took a lot of criticism about that standard.”

Another major issue the IASB tackled in the 1990s was share-based payments or share options. “It was reckoned U.S. income statements were probably overstated by 25 to 30 percent. That was because they gave themselves huge options and there was no charge,” Tweedie explains.

He says the Financial Accounting Standards Board (FASB) had previously tried to make companies expense these options but the U.S. Securities and Exchange Commission (SEC) had stepped in and said they only needed to disclose them.

He remembers: “We didn’t accept that, and we required expensing. It nearly came to a fist fight. I remember being almost nose to nose with a financial executive and he said, ‘We spent US$70 million stopping FASB doing this and we will spend more than that destroying your board and preventing you doing it.’ The next week we voted 14 to nil to do it, and the U.S. followed a year later.”

Tweedie jokes: “When I was at the ASB, it was 80 percent technical, 20 percent political, the IASB was the other way around. It was very political.”

He was at the helm of the IASB during the global financial crisis, which he blames for ending an accounting standards convergence programme the IASB had been working on with FASB. “Bob Herz, who was chairman of FASB, was very much an internationalist. In 2002, we agreed that we would look at two sets of standards, International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles, and agree between us who had the better one, and then the other one would just take it,” he says.

They began the process, but during the financial crisis, it emerged that the European Commission was planning to introduce a law allowing companies not to use fair value in certain situations, but to go back to cost, meaning they could write back losses they had incurred.

Tweedie was contacted by a number of securities regulators, including the SEC, who urged him to step in and stop the law, warning that no one would trust financial accounts if companies that were known to be making a loss were showing a profit. “We had a week to do this. We were faced with the prospect of either blowing up the markets, or not having due process. We decided we had to step in, so we allowed them to do it, but we also put in requirements for disclosure, so anybody could work back to what the real numbers should be. That stopped a lot of companies from using it.”

But he says the move cost the IASB a lot of goodwill as people did not like the fact they had not done due process. He adds that it was probably his least satisfying period in standard-setting. “After that, companies, certainly in the U.S., were fighting for survival and they weren’t really interested in converging with IFRS. Had it not been for that, I think the U.S. would be using IFRS now. It never happened because of the crisis. It was frustrating.”

“My reaction was we don’t do valuations, they are done by experts. Then, I discovered there were no experts out there. The financial instruments were all over the place, it was an absolute jungle.”

Tackling valuations

During the financial crisis, President of the European Central Bank Mario Draghi asked Tweedie what accountants were doing about valuations. “My reaction was ‘we don’t do valuations, they are done by experts.’ Then, I discovered there were no experts out there. The financial instruments were all over the place, it was an absolute jungle,” he says.

When he was approached about being chair of the board of trustees for IVSC, he agreed as long as he could look into financial instruments.

At the time, the IVSC had a single standards board made up of nine people, with three experts each in the fields of real estate, business valuations and financial instruments. A majority of five was needed to produce a new standard. But Tweedie was not satisfied with the arrangement, pointing out that two of the key votes would come from people who were not experts in the area in question. Instead, he set up separate boards for each of the three areas, and oversaw what he describes as “a major prune out in financial regulation.”

“In the same way that being a certified public accountant and chartered accountant is very well recognized, we don’t want people coming in to valuations who are not proper valuers.”

More recently, the IVSC has been working with a number of stakeholders in Hong Kong, including the Hong Kong Institute of CPAs, to introduce standards and a professional framework for valuers in the city. “In the same way that being a certified public accountant and chartered accountant is very well recognized, we don’t want people coming in to valuations who are not proper valuers,” Tweedie says. “We feel that to be a valuer, you have got to have a certain level for entry, such as exams, ethics, and continuing professional development. All the things we, as accountants, know.”

Another issue the consultation is looking at is how to value intangible assets. “If you look at the S&P 500, the net assets of a company only amount to 13 percent of the market capitalization, so 87 percent is not recorded in the financial statements. What is it?”

He points out that a lot of this difference will be due to intangibles, and accountants will have to explain what these are, and valuers will have to put a value on them. “I think it is an area that is going to expand and be very important to the accounting profession and businesses. I am very pleased Hong Kong is doing this,” he says.

“The role of the Institute is critical. If this is going to work, we need the same ethics and background that we have as accountants in valuations.”

Tweedie thinks both the Institute and CPAs have an important role to play in the initiative. “Most of us when we were training had a period when we had to value companies, so it is part of our professional DNA,” he says. “I see a big opportunity for accounting institutes to be the guardians of whatever standards come out. The role of the Institute is critical. If this is going to work, we need the same ethics and background that we have as accountants in valuations.”

He adds that one of the biggest challenges the valuations profession currently faces is a lack of acceptance. To counter this, he would like to see the introduction of an international designation for valuers that would be given out by professional organizations to show its members were properly trained and competent.

An accidental accountant

Tweedie never intended to go into accounting, and instead had his sights set on being a doctor. “I remember just before a physics exam, when I was about 15, one of my schoolboy friends asked me what Ohm’s law was, so I told him. The first question in the exam was to state Ohm’s law. I couldn’t remember it, and I got angrier and angrier. I vowed if I couldn’t remember Ohm’s law by the time the exam ended, I would never do physics again.” He did not remember it. Unfortunately, it turned out that he needed physics to get into medical school.

His father was very keen for him to become a chartered accountant. “I lived in a small town in central Scotland. I remember he took me down to the local accountant who was very pleased with himself, and he said: ‘look at me.’ The more I looked at him, the more I thought this isn’t for me. I’m not going to get involved in this.”

Instead, he went to the University of Edinburgh and did a business degree, followed by a PhD. The university was keen to keep him on as an academic, but Tweedie felt he could not teach business if he had no experience outside of a university.

As a result, the department arranged for him to spend a couple of years with an industrial company, working in different departments. “I thought, they know I’m not going to stay. I’m going to be the tea boy. So, I went out and did a CA instead,” he says.

He worked as an apprentice in Glasgow at Mann, Judd, Gordon & Co. under Professor David Flint, who later became president of ICAS. “I loved my time as an apprentice in Glasgow. I used to say if you can deal with a second-hand car dealer in the Gorbals, a pretty run-down area in Glasgow, then you can take on Wall Street bankers quite easily.

“I got great training. David was a wonderful man. We didn’t have codes of ethics, but you didn’t need them if you were with David, they just dripped off him. He was absolutely solid, and he made me as an accountant. He was superb as a guide.”

Tweedie never went back to the business department at the University of Edinburgh, and instead joined the accounting department. “I found accounting fascinating,” he says.

After six years of teaching, he was asked to join ICAS as its first technical director, later taking up a post as national research partner with KMG Thomson McLintock, before becoming national technical partner at KPMG following the merger. ​

“We feel that to be a valuer, you have got to have a certain level for entry, such as exams, ethics, and continuing professional development. All the things we, as accountants, know.”

Not fooled by numbers

Tweedie appreciates his accounting background, and he thinks there are huge benefits to being a CPA or CA. “I think it is the most wonderful training. When you think about it, nobody can fool you with numbers. You can look at a set of accounts and get a pretty good idea what a company is like. I have found it invaluable. I have been asked to do so many things because I am an accountant.”

But he adds that in the nearly four decades that he has been an accountant, he has seen a shift towards what he calls “search engine accounting.” He explains that some senior partners at a Big Four firm once asked him to give them an example of a principle-based standard, and he showed them one that was four pages long.

“They were horrified. I said, ‘You want to be very careful because I can write you a standard that will deal with 80 percent of the issues in, say, 20 pages. If you want me to deal with 95 percent of issues, it will be 300 pages.

“But that is the way accounting is going, I’m afraid. I think it is wrong. I think you should have short standards that are principle-based and hammer anyone who does anything that is way out of line.”

Tweedie also does not like the way accounting firms have become commercialized. “Auditing has become a backwater, but it is the key to the capital markets. It is a proud profession and it needs to be preserved.”

When he is not working, Tweedie enjoys gardening, reading history books, and long walks on the hills with his two Shetland sheep dogs in Edinburgh, Scotland. “I love hill walking. I love being out in the open air, I just love nature.”

Tweedie is married and has two sons. His oldest son lives in Taiwan, where he has started his own climbing and trekking business. His youngest son works for Citibank in London.

He also has three grandchildren, two girls and a boy. “It is a great joy to have grandchildren,” he says. “My eldest granddaughter, who is 14, won the British Rowing Eights with her school and is the National Champion of Rowing.”


In December 2018, the IVSC formed its Financial Instruments Valuation Standards Board to lead the development of standards for financial instruments. The board includes leaders from global banks, professional bodies and data providers.

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